Club retailers to see higher growth over next three years, Deloitte study finds

Surveyed executives see potential for channel conflict

NEW YORK — Club retailers could be in for a good time over the next three years, according to a new study.

The study, by Deloitte, found that consumer products executives expect growth through warehouse club retailers to outpace those of other retail channels, including mass merchandise, supermarkets and online retail.

According to the study, for which Deloitte polled 79 consumer packaged goods manufacturers and 53 retailers between Oct. 30 and Nov. 6, 2012, 89% of consumer packaged good executives expect their company's sales through warehouse retailers to increase during the next three years, while 49% expect to see such an increase in grocery channel sales, and 18% expect to see sales in the grocery channel decline.

"Consumer products companies are responding to the increased sales and branding opportunities in the warehouse club channel, particularly in expanding segments traditionally dominated by grocery and mass merchandise channels," Deloitte vice chairman and consumer products leader Pat Conroy said. "Club retailers have been remodeling existing stores, including allocating more space for food, particularly organic, healthy and fresh offerings, and personal care products. These retailers also continue to provide a variety of services and benefits to members, whether it is for personal consumption or for the members' business."

Seventy-nine percent of those surveyed expected warehouse clubs to increase the number of food, household goods and personal care product SKUs, while 75% expect them to increase their geographic presence and add space allocated to health and wellness products. In addition, many executives said club stores were increasing their appeal to a wider array of consumers, with 77% saying members make more trips, 78% saying they spend more and 63% saying consumers find the stores more appealing than three years ago. The stores are most frequented by affluent and high-income consumers, with 46% of respondents saying they themselves shopped at the stores, and 71% of those making more than $100,000 in household income saying the same.

"Unlike past recessions, where consumers eventually returned to their previous shopping habits, this recession left a scar, not a bruise, and consumers remain hesitant to break from their cost-conscious routines," Conroy said. "Economic uncertainty and consumers' focus on value has made club stores a more important channel for many consumers, including those who are at the higher end of the income scale and represent a more lucrative target customer for retail and consumer products brands."

Seventy-one percent of surveyed executives said pricing differences between warehouse club products would increase conflicts with traditional supermarkets and mass merchandisers, while 53% of consumer packaged goods executives said they viewed sales to the warehouse club channel completely or primarily as a shift from other channels like grocery and mass merchandisers.

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